Capping a dramatic, nearly three-hour annual shareholder meeting, Wells Fargo announced Tuesday that all of its directors had been re-elected but some barely received a majority, a strong rebuke to a board that oversaw the bank during its sales scandal.
All but three of the directors received less than 81 percent of the shares cast, with risk committee chairman Enrique Hernandez Jr. receiving the lowest tally, 53 percent.
It’s extremely rare for corporate directors to be voted out or even to have a poor showing in annual shareholder votes. Running unopposed, they typically receive voting percentages in the high 90s.
“The Wells Fargo stockholders today I think have sent the entire board a clear message of dissatisfaction,” board chairman Stephen Sanger, who received 56 percent of shares cast, said after the announcement. “And let me assure you that the board has heard that message.”
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Wells Fargo’s board was on the hot seat after the San Francisco-based bank reached a $185 million settlement in September over allegations that its employees potentially created more than 2 million unauthorized customer accounts to meet aggressive sales goals. The scandal has tarnished the bank’s image, cost former CEO John Stumpf his job and spurred multiple investigations.
New York City Comptroller Scott Stringer, who voted pension fund shares against 10 directors, called the results a sign that investors have lost faith in Wells’ board.
“This vote demonstrates that these directors no longer have a mandate,” he said in a statement. “Investors want change.”
The bank’s leaders repeatedly apologized Tuesday to shareholders who vented frustration with the scandal as well as individual troubles with the bank.
In the most dramatic moment, Sanger briefly recessed the gathering after community activist Bruce Marks disrupted the proceedings, calling on directors to explain why they should be re-elected. The meeting resumed minutes later after security guards grabbed Marks by his arms and dragged him from the room.
“What are you afraid of?” Marks asked as he was being removed.
Sanger had told Marks he was out of order multiple times and later said he was removed because he had made a “physical approach” toward board members. One audience member, however, disputed that was the case, and Sanger said he was sorry if he had shared incorrect information.
Before the meeting, Marks, CEO of the Neighborhood Assistance Corporation of America, had told the Observer he planned to make a statement critical of the bank’s board, which he said did not do its job by allowing the scandal to fester.
“The stupidity argument doesn’t fly,” he said.
The vote held before about 250 shareholders at a Florida resort had been expected to be close after two major firms that advise investors had urged shareholders to vote against multiple directors. Major pension funds, including North Carolina’s, had also signaled plans to vote against some of the directors.
Speaking with reporters after the meeting, Sanger said the board was not considering replacing any of the directors who received low vote tallies, saying conversations with investors showed they weren’t interested in getting rid of any particular board member. Instead, investors targeted risk committee members and directors who chaired committees.
“What we are committed to doing, though, is refreshing the board over time,” he said. “We will continue to add new directors as the longer-serving ones run off the board.”
The retired chairman of cereal maker General Mills said he didn’t see the results as a rebuke of any individual member but a “desire to see us respond” to the scandal. The three newest board members – new CEO Tim Sloan, Karen Peetz and Ronald Sargent – received 99 percent of votes cast.
Shareholders also approved the bank’s executive compensation plan and rejected all proposals submitted by shareholders.
Sanger kicked off the meeting by saying he was “deeply sorry” over the scandal and by highlighting the board’s effort to investigate the scandal.
“We know these issues are not what you expect of us,” he said.
The repeated apologies, however, didn’t dissuade shareholders from targeting Wells executives and directors for their lax oversight.
Brandon Rees, of the AFL-CIO, said the bank had a “mushroom” board because it was kept in the dark and fed horse manure from management. “The board needs to refresh itself,” he said.
Wells also heard from customers and employees who have had difficulties with the bank. A former credit manager at Wells Fargo, a single mom with kids, said that the bank’s former compensation plan “was set up like a constant treadmill.”
“I brought in hundreds of thousands of revenue for the bank yet struggled to make ends meet,” she said.
Wells directors knew they were in for a close vote after proxy advisory firms Institutional Shareholder Services and Glass Lewis had recommended investors vote against as many as 12 of the board members. Some of these targeted directors, such as Hernandez, fared the worst.
In recent months, Sloan and Sanger met extensively with investors in an effort to maintain their support, they said.
“It was clear to us that they like the things that have been done,” Sanger told reporters. “They like the transparency that the company has shown. And they really want to see all the actions that have taken place be successful.”
The company’s biggest shareholder, Warren Buffett’s Berkshire Hathaway, which owns about 10 percent of shares, had previously signaled its backing for the directors.
During the meeting, Sanger repeatedly referenced a board investigation that squarely placed blame on two former executives: community banking head Carrie Tolstedt and CEO Stumpf. He has also highlighted other changes, including eliminating the sales goals that helped fuel the scandal.
Speaking with reporters, CEO Sloan said in hindsight he should have moved faster to replace Tolstedt after becoming Wells’ president in November 2015. He gave her time to make improvements but “she just didn’t meet the standards that I was looking for,” he said. Through her attorney, Tolstedt has disputed the findings of the board report.
While the company continues to cooperate with outside probes, “management is finished with its investigations,” Sloan said, “and we’re moving forward.”